GM considers selling its Hummer brand

With gas prices rising, the Hummer niche market is all but disappearing.

DETROIT (AP) — As if high gas prices, a weak economy and a strike by a major supplier weren’t enough to drag down Hummer’s sales, Hummer dealers are now reeling from the news that General Motors Corp. may consider selling the brand.

GM Chief Executive Rick Wagoner told shareholders last week that the automaker was conducting a strategic review of Hummer and was considering all options, from revamping of the lineup to a partial or complete sale. Wagoner gave no time line or further details.

“I’m not real happy with General Motors right now,” said Brad Johnson, general manager of Hummer of Columbus in Dublin, Ohio. “It was a poor choice of words on their part and it’s a bad decision to come out and say something when you don’t know what’s going to happen.”

Jim Bushart, parts director at Lynch Hummer in Chesterfield, Mo., said he assumed GM was analyzing the Hummer brand as gas prices reach $4 a gallon and consumers look for more fuel-efficient vehicles. But he was surprised the automaker discussed the review publicly.

Others griped that the company could hurt sales of Hummer’s first pickup, the H3T, which comes out this summer.

GM spokesman Nick Richards said the company decided to announce the review, along with the closure of four plants, to demonstrate how seriously it takes the U.S. market’s rapid shift away from trucks and sport utility vehicles.

At an event in Washington Thursday, GM’s North America President Troy Clarke again refused to give a timetable for the review, but indicated it will be done quickly.

Hummer has always been a niche brand, with U.S. sales reaching a peak of 71,524 in 2006. By comparison, Honda Motor Co. sold 53,299 Civic sedans last month alone. But unlike small cars whose sales have exploded this year, the Hummer niche is disappearing. Hummer took the worst hit of any brand through May of this year, with U.S. sales down 36 percent compared to the same period the year before, according to Autodata Corp.

Dan Towbin, who sits on GM’s Hummer dealers’ advisory board and whose 60,000-square-foot Las Vegas Hummer dealership is the largest in the U.S., said he wasn’t surprised by the news of the review. Towbin said GM has assured him it’s giving equal consideration to continuing the brand with newer, more fuel-efficient vehicles.

GM hasn’t named any potential buyers, but they could include Indian automakers Tata Motors Ltd., which just acquired the Land Rover and Jaguar brands from Ford Motor Co., or Mahindra Mahindra Ltd., which was in the running for Land Rover and Jaguar, according to Aaron Bragman, an auto analyst with Global Insight. Bragman said Chinese automakers also have shown some interest in acquiring an American brand.

But Bragman said there are significant barriers to a sale, including the tight credit market and the degree to which Hummer has been integrated into GM. For example, the midsize H3 shares a platform with GM’s compact pickups.

“I can’t see them selling it but I do see them restructuring and coming up with some new product, a rethink of what they’re doing with it,” Bragman said.

Craig Hubble, general manager of Hummer of Novi and Detroit Hummer, said he is selling every vehicle he can get, but his inventory has been severely diminished.

The broader problem for Hummer and other large vehicles has been the fast rise in gas prices. Sales of large pickups fell 21 percent through May, while sales of large SUVs were down 39 percent. The H3 gets 15 miles to the gallon, according to government estimates. The government doesn’t estimate fuel economy for the H2 because it’s so large, but dealers estimate it gets around 12 miles per gallon. With gas at $4 a gallon, it costs $128 to fill up the H2’s 32-gallon tank.

Towbin and others agree there’s too much equity in the Hummer brand name to cancel it entirely.

There’s also a lot of money invested by the brand’s 170 dealers, many of whom built mammoth, Quonset-hut styled showrooms in the last few years according to GM’s specifications.

“There’s too much money invested here for GM to do away with it,” Johnson said. “They’d be looking at a huge class action lawsuit.”

Other issues could make GM pause. While Hummer sales are down in the U.S., they’re growing elsewhere, Richards said. Hummer sales were up 42 percent in Europe through April, thanks to booming sales in Russia and a new right-hand-drive version in the United Kingdom. Sales in the Middle East were up 27 percent, while sales in the Asia and Pacific region shot up 345 percent as right-hand-drive versions arrived in Japan and Australia.

And there are still legions of U.S. fans for whom gas prices are a minor inconvenience if they have $57,500 to spend on an H2 or $31,000 on an H3.